General Distribution OCDE/GD(95)117

COMMITTEE FOR INFORMATION, COMPUTER AND COMMUNICATIONS POLICY

THE ECONOMIC AND REGULATORY ASPECTS OFTELECOMMUNICATION NUMBERING

ORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT

Paris 1995

024263

Document complet disponible sur OLIS dans son format d'origine

Complete document available on OLIS in its original format

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SUMMARY

Over the last few years numbering arrangements for telecommunication services have become akey issue for discussion among policy-makers, regulators and telecommunication operators in a number ofcountries. Historically, the allocation of numbers has been seen primarily as a technical issue. Engineersat the Public Telecommunication Operators (PTOs) have had complete control over number allocationfunctions. In many countries, PTOs themselves have been designated as the legal entities authorised tocontrol and manage national numbering plans and to make sure that they comply with national andinternational rules. Indeed, they themselves have been setting the national rules, if any, regarding numberallocation.

With the advent of liberalisation, however, and the rise of competition in service provision, theissue of numbering acquired important economic, political and commercial dimensions. A major concernexpressed by competitive service providers in countries where competition is being introduced, is that thecontinuing control of national numbering schemes by incumbent operators may increase barriers to entryto new entrants in a market and thus hinder competition. Current discussions at the national level focus onwhat numbering arrangements would best facilitate access of competitors to numbering resources in orderfor an effective competition to flourish.

Moreover, the availability of technology has opened the way to new number-demandingapplications such as Freephone and premium-rate services. The defeat of monopoly power of incumbentoperators and the emergence of new services, call for changes in the existing number allocation practicesand for restructuring of national numbering schemes in order to provide space for future services to grow.Many OECD countries have revised, or are in the process of doing major revisions, to their nationalnumbering plans. At the same time, the issue of setting a market for certain premium numbers and/ornumber ranges has come to the fore. Given the scarcity of these numbers and the increased demand byusers, it is argued that market mechanisms could allow for a more efficient distribution of this resource.

There is an on-going realisation in most OECD countries that full responsibility over theadministration of national numbering plans should be entrusted to a separate body other than the dominantPTO. The emergence of new players in a market has put in question traditional forms of incumbents'numbering management control. New forms of administrative structure and consensus policy-making fornumbers among all parties concerned are among the proposals put forward to encourage a more efficientallocation of resources.

However, little progress has been made so far with regard to the actual transfer of policyactivities to a disinterested third party. The pace of modifications in national numbering plans has variedbetween OECD Member countries and has been depended much upon the perceived urgency for a newnumbering scheme (numbers run out) as well as on the timeframe for the introduction of competition inservice provision.

This report, prepared by Ms. Natasha Constantelou (Centre for Information and CommunicationTechnologies, University of Sussex, United Kingdom). focuses on the policy issues that arise from the

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process of restructuring of national numbering schemes. Numbering is viewed not as a purely technicalmatter but as an issue which addresses important organisational and economic consideration for regulatorsand policy-makers. The report primarily consists of an analysis of the current situation and attempts to a)identify the main economic and regulatory characteristics of the process of number allocation; b)examines the experiences of certain OECD Member countries who have been engaged in reformsconcerning their numbering arrangements for the development of existing and new telecommunicationservices; and c) provide policy recommendations on the efficient management and administration ofnational numbering resources.

After approval for derestriction by the Committee for Information, Computer andCommunications Policy in April 1995, this report is made available to the public on the responsibilityof the Secretary-General of the OECD.

Copyright OECD, 1995

Applications for permission to reproduce or translate all or part of this material should bemade to:Head of Publications Service, OECD, 2 rue André-Pascal, 75775 Paris Cedex 16, France.

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TABLE OF CONTENTS

SUMMARY ...............................................................................................................................1

CHAPTER 1: TELECOMMUNICATION NUMBERING AS AN ECONOMIC RESO URCE .........6

1.1 The functions of numbers........................................................................................61.2 Numbering and competition....................................................................................71.3 Numbering as a national resource............................................................................91.4 Value intrinsic in numbers.....................................................................................101.5 The need for new organisational schemes and re-regulation...................................12

CHAPTER 2: THE REGULATORY ASPECTS OF NUMBERING .................................................13

2.1 National numbering authorities..............................................................................132.2 Numbering policy and planning.............................................................................152.3 The administration and management of numbering schemes..................................16

a) Number allocation.......................................................................................16b) Number Reservation....................................................................................16c) Publication of numbering schemes..............................................................17d) Number trading...........................................................................................17e) Charging of numbers...................................................................................18

2.4 Portability of numbers...........................................................................................21

a) Types of portability .....................................................................................21b) Regulatory aspects of portability.................................................................23

2.5 Directory services..................................................................................................25

a) General issues.............................................................................................25b) The United Kingdom experience.................................................................25

CHAPTER 3: INTERNATIONAL AND REGIONAL REGULATORY SYSTEMSAND NUMBERING MANAGEMENT IN OECD MEMBER COUNTRIES ............27

3.1 The International Telecommunication Union.........................................................273.2 European regulatory initiatives..............................................................................293.3 Numbering in the OECD Member countries..........................................................30

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CHAPTER 4: CONCLUSIONS AND POLICY RECOMMENDATIONS ........................................33

4.1 Guidelines for the short term.................................................................................334.2 Guidelines for the long term..................................................................................35

ANNEX 1: RESPONSES FROM OECD MEMBER COUNTRIES..............................................36

NOTES AND REFERENCES...............................................................................................................43

BIBLIOGRAPHY .............................................................................................................................43

Figure 1. Organisations responsible for the regulation of numbering in OECD countries................31

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CHAPTER 1

TELECOMMUNICATION NUMBERING AS AN ECONOMIC RESO URCE

The rise of new services and the advent of competition have given to telecommunicationnumbers a significant economic dimension. Any economic considerations around numbers arise for twomain reasons:

• First, a fairly administered numbering plan can facilitate competition in service provision andthus bring benefits to users by reducing tariffs and by increasing the quality standards inservices provided. In order for competition to flourish, however, operators and serviceproviders should be treated on an equal basis regarding access to number resources.Proprietary rights over numbers could hamper competition and prevent the growth of nichemarkets in service provision.

• Second, numbers become important tools in the hands of value-added service providers.Given that most of these services are highly profitable for operators, the allocation of specificnumber ranges to provide exclusive access to services such as mobile telephony, personalcommunication and premium rate services increases value of numbers. Moreover, it isrecognised that a limited range of numbers contain "higher" value than others because theirmemorable structure brings benefits to the called party. The possible exploitation of the truemarket value of such numbers has been an issue of discussion for the administrators ofnational numbering schemes.

This part of the report examines the commercial value of numbering space. Since access tonumber resources is being increasingly recognised as an act which entails important economicimplications for both users and service providers, the question of who owns numbering resources and whosets the rules in number allocations practices acquires significant economic and social dimensions.

1.1 The functions of numbers

National numbers are sets of digits which, when dialled, signify the most appropriate networkrouting in order to provide access to network subscribers or telecommunication services within a country.International numbers perform the same operation in a world-wide scale, that is, they provide access totelephone subscribers or telecommunication services to different parts of the world. Under internationallyagreed conventions, the structure of an international number consists of a) the country code (CC), whichindicates the destination country, b) the national destination code (NDC), which is used to indicate aparticular area within a country, and c) the subscriber number.1

Country codes have been allocated by the Telecommunication Standardization Bureau of theInternational Telecommunication Union [TSB-ITU, formerly International Telegraph and TelephoneConsultative Committee (CCITT)]. According to the scheme, the world is divided into 9 worldnumbering zones, with starting digits 1 to 9 to indicate continents or greater geographic regions (for

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example, digit 1 indicates North America and the Caribbean, starting digits 3 and 4 indicate Europe, etc.).The allocation and administration of country codes is a responsibility of the ITU, while nationaldestination codes and the assignment of subscriber numbers are within the responsibilities of nationalnumbering plan administrators. Thus, there is little or no harmonisation of the existing nationalnumbering plans. Often, there is no similarity between the access code to the international network andprefixes for network and service selection used in one country and those in use in other countries.Similarly, national number lengths vary, with numbers in most countries being 7, 8 or 9 digits long.2

Within each country, telephone numbers can provide information on the geographic location ofthe called party, the tariff associated with the call, the type of service the caller has access to, or acombination of the above. For basic telephony, countries use the same geographic system where areacodes contain information about the location of the calling party. Since in most countries tariffs are stilltied to the routing of calls and to the distance associated, this geographic system of numbering providesthe basis for estimating their tariff. Certain services, such as mobile telephony, paging, freephone andpremium rate services, because of their nature, do not relate to particular geographic locations. Accesscodes and numbers associated with these services have no geographic significance. These numbers inmost numbering schemes have charging information and service information embedded in them due totheir identifiable access codes. An example would be the freephone numbers whose recognisable codesignals that there is no charge for the user. There are cases, however, where providers of non-geographicservices have the flexibility to make their own arrangements in the number ranges they are allocated, so asto provide users with some information about the location of the called party. In New Zealand, forinstance, the two cellular operators Telecom Cellular Ltd and Bell South New Zealand have been allocatedthe codes "025X" and "021X" respectively for subscriber access to their cellular mobile services. Bothoperators have arranged so that the last digit (X) of the code corresponds to the geographic location oftheir cellular switches.

In the above example, apart from the charging and type of service information, the two differentaccess codes indicate to subscribers the identity of service providers who handle their calls. In a singleoperator environment such information is unnecessary since all calls are routed through a specific networkdesigned by the operator of the service. In a duopoly or multi-operator environment, however, thisinformation is highly relevant. In such circumstances, numbering and its allocation is not regarded assimply a technical phenomenon but as a problem that has important economic and policy dimensions.

1.2 Numbering and competition

The majority of OECD countries have already experienced changes in their telecommunicationspolicies with the advent of competition. The United States, Japan, the United Kingdom, and Finland havebeen at the forefront of pro-competition arguments and have introduced competition in mosttelecommunication services markets. In the United States, competition at the local loop level has slowlystarted to emerge. The operation of cable telephony services in areas serviced by RBOCs is also expectedto promote competition at the local loop so that Local Exchange Carriers (LECs) will no longer haveexclusive rights in basic telephony service provision within their territories. Most countries of theEuropean Union have agreed to introduce competition in basic voice services by 1998. In Australia, theGovernment has announced its intention to change the existing duopoly regime between Telecom andOptus and allow more players in the market after 1997. Liberalisation in New Zealand has allowedcompetition in local telephone service between the incumbent Telecom New Zealand and ClearCommunications Ltd., while a number of operators have expressed their interest to enter other marketsegments in the near future.

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As competition emerges service providers and new entrants will need to have access to numberson an equal footing. The principle of equal access, however, is difficult to put into practice, especiallywhere incumbent PTOs have complete numbering management control and dominate numbering relateddecisions. Experience from countries where the issue has been debated indicates that incumbents may usenumbering in an anti-competitive way. By imposing unnecessary rules and conditions for access toalternative networks, dominant operators establish artificial barriers to entry for new entrants and thushinder competition. Meanwhile, any disputes on numbering issues between new entrants and theincumbent usually benefit the latter since they may delay new entry and thus limit a competitor's marketpower (Ministry of Commerce, New Zealand, 1992).

In practice, the search for numbering arrangements that would best facilitate competition hasinitiated numerous debates in most OECD Member countries. The experiences may vary according to thecommitment shown by regulators to intervene and guarantee fair and non-discriminatory access to numberresources. Still, a number of competition issues need to be considered.

Where competition in long-distance and international services has developed, a usual method forcarrier selection is the use of access codes or Carrier Identification Codes (CICs) which identify thenetwork where the call is being processed and can give routing and billing information to the customer.This method is extensively used in countries such as the United States, Finland and Japan where nationalregulatory authorities have assigned codes to carriers. Each international and long-distance carrier isgranted an identification code which should be dialled before the digits of the international number. Theaccess code method, however, if applied only to new entrants, establishes an artificial differentiationamong operators and gives a competitive advantage to the incumbent. Unless both the incumbent carrierand the new entrants have been assigned access codes, all of equal length, the requirement to dial extradigits is undoubtedly a discriminatory practice for the new carriers.

Equal access, on the other hand, assumes that all carriers are treated in an objective and non-discriminatory way. The establishment of a pre-subscription method, where callers could pre-select thecarrier of their choice can provide better guarantee for equal competition. Most numbering schemes givecustomers both options, that is, they provide for a choice of operator on a pre-subscription basis and allowthe use of access codes to override pre-subscription and provide access to other networks on a call-by-callbasis.

Equal access is not achieved when an operator, as for example Telecom New Zealand, whichmanages the numbering scheme, has itself set certain conditions for availability of pre-subscription only inthe case where competitive operators have achieved a required market share defined by the incumbent.3

Since no operators have reached that figure, pre-subscription is not available in New Zealand, at theexpense of users and service providers.

As far as local service competition is concerned, it is widely accepted that integrated numberingis crucial to competition. A common practice is for particular blocks of numbers from the numbering planto be allocated to competitors. This is a practice widely used in countries such as the United Kingdom,Finland, Australia and recently in New Zealand. It is recognised that the number of blocks allocated toeach operator should correspond to its share in the market and that any allocation arrangements shouldtake place in a fair and timely manner. However, where management of numbering schemes is undertakenby PTOs there is no way to guarantee that bilateral agreements between the parties concerned would notplace a competitor in an inferior position than that of the incumbent and, thus, hinder rather than foster itsgrowth. Such cases could be, for example, a delay in the allocation of number blocks or the allocation ofsmall blocks of numbers to service providers that would be inflexible to plan and more difficult to

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administer. In local service provision, however, a major barrier to competition is the compulsory changeof a customer's telephone number when he shifts to another operator.

The above situation of discriminatory behaviour is likely to emerge with regard to thecompetitors' access to value-added services. Given the commercial value of these services it is expectedthat operators who dominate the market would like to preserve their position and the profits they gain. Bycreating artificial obstacles to competing service providers who want to offer similar services theymaintain the control over the emergence of competition and even prevent it where possible. An examplein this case is the exclusion of Mercury from BT's 0800 Freephone range.

In the United Kingdom, Mercury and other operators had to apply to BT for numbering space.4

When Mercury requested numbering space in the "0800" range used by BT for its Freephone service, BTclaimed copyright of the code and prevented Mercury from having access to a code which had alreadyestablished a commercial profile among users (Mercury, 1993). Moreover, BT has made allocations for itscustomers of various numbers across the "0800" range leaving thus no complete blocks for use by otheroperators (OFTEL, 1993b). Given the significant financial benefits of freephone service provision,Mercury decided to develop an alternative freephone service for its own customers engaging itself in asignificant commercial investment. Today, two codes are currently in use in the United Kingdom for theseservices, "0800" for BT and "0500" for Mercury, while there is a widespread support among interestedparties for a common United Kingdom Freephone number and the opening up of "0800" range to alloperators.

In New Zealand, a similar problem occurred with respect to the allocation of access codes forcellular services. Bell South, the only competitor in cellular services to the dominant Telecom Cellular,had been allocated by Telecom the codes "0213", "0214", "0216", "0217" and "0219" of the range "021X"to provide access to its cellular service. Its competitor, which is a subsidiary of Telecom New Zealand,had been assigned the entire "025X" range and was able to attach a geographical significance to the codesthat would permit it to introduce tariff differentiation in the future. This obvious discrimination againstBell South was settled after intervention by the Ministry of Commerce.

1.3 Numbering as a national resource

The proliferation of numerous other entities, apart from the dominant carrier, and theirinvolvement in a country's telecommunication industry have increased demand for numbers andconsequently their commercial value. As competition increases and new numbering requirements emergeit becomes universally recognised that "telephone numbers are a national resource and should be for thecustomer -- not for the operators to brand" (OFTEL, 1993a). New operators and service providers needto have access to numbers and have the right to utilise them in a way that best suits their needs and canfacilitate service provision. In this respect, proprietary rights over numbers by the ex-monopoly operatorsprevent equal access to number ranges and impede competition.

The notion of equal access for new market entrants includes also equal access to numbers whoseparticular characteristics make them attractive to users. The usual method for distribution of these"golden" numbers to end-users has been on a "first come, first served" basis. This approach, however, isinefficient when the list of potential candidates is long and resources are limited. Especially, if there is nolimit on the quantity each customer may obtain, it is possible that a single user can allocate for himselfmore numbers than appropriate. In a multi-operator environment, where operators are allocated numberranges and then offer these special numbers to their subscribers, later market entrants may be less able to

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provide such numbers. For these reasons, the issue of commercial exploitation of these resources hasfinally derived particular attention.

1.4 Value intrinsic in numbers

It is obvious that all number ranges available in a geographic area do not have the same value tousers. For the purpose of our analysis, we divide "users" into four broad categories: residential users,community users (including government agencies and social welfare groups), corporate users, andoperators/service providers. For residential and community users numbers are means for communication.Their value lies on the fact that users can access and be accessed by other people. Numbers are, thus,significant to these users from a social point of view. For corporate users and operators/service providers,however, numbers represent more than simple communication routes. Companies use numbers in theiradvertising campaigns and some may rely on these numbers to increase their customer base and revenues.For operators and service providers numbers represent the only means of "doing business". They are the"interface" which permits subscribers to have access to the operator's network and make use of the servicesit provides. For these two categories of users numbers are significant from a commercial point of view.

This commercial value, nonetheless, is not homogeneous among numbers. Certain numbers areeasier to remember and dial than others and give their owners a competitive advantage in terms ofmarketing their products or services. An example can be taken from the area of premium rate services.If, in the case of two competitive service providers providing live information services, the first has beenassigned an easily memorable number for callers while the second has an ordinary number, the providerwith the most "user-friendly" number has more chances to obtain higher profits than his competitor,irrespective of the quality of service he provides. This is particularly the case for all services that use theircontact numbers as primary marketing tools.

From an economic point of view, this is a case where a differential rent exists, but since there areno charging mechanisms to recover the value intrinsic of premium or special numbers its existence is notapparent. One could also argue the existence of a scarcity rent in the availability of certain numbers, in thesame way as scarcity rents are created in the case of shortage of radio spectrum space. Numbers withparticular significance to users, golden or special numbers, are a scarce resource. On the other hand, theirdemand increases in parallel with the evolution of new services and eventually the demand for suchnumbers exceeds their supply. The emergence of a scarcity rent in this case relates to the scarcity of thespecific numbering resources.

The above raise concerns over whether establishing a market for certain numbers or numberranges would be useful in terms of making users aware of the "economic value" of these numbers. If theallocation of such numbers is free then there is no signal to indicate their intrinsic value tousers -- especially to corporate users and value-added service providers -- except that some may get higherprofits than others because their contact numbers are more attractive to callers. Moreover, the emergenceof alpha-numeric telephone numbers in some countries would intensify the problem given that most ofthem are considered as premium numbers. Establishing appropriate mechanisms based on market criteriawould sort out candidates according to their desire for a particular number.

A further issue is whether market mechanisms should also apply to all number ranges dedicatedto value-added and special code services, such as the Freephone or premium rate number ranges. Theargument for this is that value-added services are a special category of services where profits are relativelyhigh and competition is generally intense. The lack of a price in numbers tends to favour the provision ofnew services even though their share in the market may be fairly limited. Such services, whose success is

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in doubt, occupy significant number space, and may restrain other services from expanding. Imposing afee for access to these ranges may discourage any inefficient use of numbering space and compensate forthe value intrinsic of the resource. The question that arises here is how to put this principle into practice,since there is always the danger that it may have the opposite effect than that anticipated. In other words,it may hinder rather than foster the development of new services by increasing the barriers to entry toentrepreneurs who wish to enter a market.

Golden, or premium numbers, can be found in any range, and in any type of service. Asindicated above, within a number range dedicated to premium rate services there are numbers which areexpected to be valued more than others owing to their distinctive and memorable digits. The same appliesto similar numbers in ranges dedicated to other value added services, such as paging services, freephoneetc. Such numbers are also found in ranges reserved for basic telephony services. A memorabletelephone number, for example, may be of particular importance to a government agency, a smallbusiness, or even to a residential user. This last point raises important questions:

a) Should users pay for special numbers or number ranges irrespective of the type of service thesenumbers have been reserved for? If these numbers belong to a value-added or basic telephonyservice range would that make a difference in their pricing?

In Australia, AUSTEL, the regulatory body in charge of the numbering scheme has beenconsidering the option of introducing market mechanisms in number allocation since 1992. In its policydocument on number charges issued in January 1994 it states that "charges to recover the value intrinsicin numbers may be levied only in respect of number ranges as specified in Schedule A of this Policy"where Schedule A presents a list of the following services: satellite telephone, mobile and paging services,special network services (premium number special network services), freephone, Universal PersonalTelecommunication Services (UPT), facsimile, and live information services. Basic telephone services arenot included in the list, therefore, special telephone numbers addressed to the wider public are not subjectto any type of charge (AUSTEL, 1994a). AUSTEL's policy applies to secondary (and tertiary) allocators,that is to operators and service providers who make individual allocations to their customers, and leavesthem the right to decide the level and method of charges.

b) Should the same charging principles be applied to all users?

Concerns may be raised over whether all users should be charged for the allocation of specialnumbers or certain categories of users should be exempted. For example, government users, welfaregroups or even certain cases of individual users could be regarded as exceptions to the rule. A firstreaction from the users' side comes from a government body in Australia which proposes that"commercialisation policy should provide range of premium numbers to government at no charge"(AUSTEL, 1992a). In this case, social welfare is expected to supersede the market. Pricing is viewed as anecessary mechanism to ensure efficient use of numbers but as applied to users of the private businesssector and those individuals who get high profits out of the use of premium numbers. This implies thatother methods need to be found for non-commercial users, where market mechanisms do not coincide withpublic policy objectives. Ultimately, a common accepted resolution to the problem would be theintroduction of a "dual-system" where users would be separated into categories as those describedpreviously. Then market rules would apply to all "commercial users" of premium numbers while non-commercial users would either pay a nominal fee associated with the use of such a number, or pay nospecial fee at all.

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1.5 The need for new organisational schemes and re-regulation

The notion of numbering as a national resource that can facilitate the introduction of competitioninvolves important economic and commercial implications that need to be considered by all players in amarket. Therefore, the conventions where all responsibilities for planning, management and allocation ofa country's numbering resources were conferred upon the national TO can no longer be sustained. Moreand more countries recognise the need to establish a numbering organisation structure independent of theincumbent operator and to seek a wider consensus among users groups and service operators involved innumbering issues.

It took considerable time for regulators to realise the mismatch between their calls forcompetition and the current practice of number branding by network operators. As in the case offrequency spectrum, it was as if the introduction of competition was programmed without previouslyconsidering the potential obstacles due to the lack of numbering resources and their inadequateadministration by the dominant players in the market (OECD, 1993). In spite of an initial delay, thetransfer of responsibilities over numbering from PTOs to independent authorities has been a matter ofdiscussion in many OECD countries. A number of OECD countries such as the United States, theUnited Kingdom, Australia, the Netherlands, France and New Zealand, as well as the European Union, arecurrently seeking new forms of institutional organisation that would match with new objectives andcriteria for number allocation. In the light of competition trends in the telecommunication industry, theissue of efficient administration and management of numbering resources has finally derived particularattention. The following chapter gives an overview of the main administrative and managerial issuessurrounding numbering, as they emerge from discussions in countries which have been engaged innumbering review activities.

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CHAPTER 2

THE REGULATORY ASPECTS OF NUMBERING

International policy trends in the telecommunication industry have called for a separationbetween regulatory and operational functions in the telecommunication sector. With regard to thenumbering issue, there is a strong consensus among interested parties -- national regulators, competitiveservice providers and end-users -- that control over numbering schemes should be transferee to anindependent entity in order to prevent anti-competitive behaviour from dominant PTOs. Many OECDcountries, such as Australia, Finland, France, and the United Kingdom have proposed a schema wherenational regulatory authorities would be responsible for the administration and management of the numberresource. Other countries such as the United States, Mexico and New Zealand have adopted a more"reactive" approach where industry participants, users and regulators seek to reach consensus overnumbering matters. The shift to new forms of numbering organisation structure and the forthcomingchanges in the methods by which numbers were administered have revised new issues for discussion.

2.1 National numbering authorities

Numbering is a dominant feature of the telecommunication infrastructure which incorporatespolicy and planning activities. It also incorporates administrative and management activities such as theassignment of numbering resources to operators/ service providers, the publication of numbering schemes,etc. Such activities can no longer be entrusted to incumbent PTOs. The complexity of thetelecommunication environment today and the emergence of new services and technologies call for aconsensus among the players in a market upon the way numbering schemes are developed. Anindependent body responsible for the administration of national numbering resources is recognised as themost appropriate solution to ensure fair competition.

Many OECD countries have announced their plans to take number planning functions away fromPTOs and give them to independent regulatory bodies. The European Commission, in its CommonPosition on the application of ONP to voice telephony, has clearly stated that "Member States shall ensurethat national telephone numbering plans are controlled by the national regulatory authority, in order toprovide for fair competition".5 Little progress, however, has been made in the European Union area withrespect of the transfer of responsibilities from PTOs to an independent authority, with the exception of theUnited Kingdom where the transfer of responsibilities from BT to OFTEL is expected to be completed inJune 1994. In the European Union, the European Telecommunication Office set-up under theresponsibility of ECTRA will be assigned numbering as a key task.

In North America the situation is quite different. Bellcore, an entity owned by theBell Operating Companies (BOCs), has been assigned the function of administering the North AmericanNumbering Plan (NANP) since divestiture of AT&T in January 1984. The NANP is the numbering planfor World Zone 1 (WZ1) which consists of 18 different countries, including the United States, Canada andmost of the Caribbean. Bellcore has been subject to the plenary jurisdiction and oversight of theappropriate regulatory agencies of these countries.6 From the time it has undertaken full responsibility

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over the administration of NANP, Bellcore has initiated a number of consensus processes among membersof the world's largest and most competitive telecommunication market, in order for the industry to agreeon common numbering action plans (Bellcore, 1993a). Recently, Bellcore has put forward a proposal onthe future of numbering in WZ1 which includes modifications to the existing numbering structure in orderto create sufficient numbering space for the future. Bellcore has started a "contribution-driven consensusprocess" with the aim to establishing a framework of action for all identified issues where consensusamong interested parties has not been reached (Bellcore, 1993a).

However, Bellcore's ability to administer fairly the NANP is currently being challenged bycarriers and service providers who base their criticisms on Bellcore's relationship with BOCs. Discussionsare under way with regard to an alternative model for a new numbering organisational structure that wouldreplace Bellcore in the administration of the NANP. The industry is keen to obtain full control overnumbering issues, which will exercise through a committee composed of representatives of major industryentities. Although no final agreements have yet been reached, the conception of an industry-ledorganisation responsible for numbering is quite innovative. Major US-based telecommunicationcompanies, such as AT&T, MCI, GTE, and Sprint, are those who favour a numbering organisationstructure under the sponsorship of the industry. Yet, in spite of the wide US-industry support in thisproposal, there are important matters that need further discussion. How can a wide industry participationbe ensured so as to cover the whole of WZ1? Furthermore, what participation mechanisms could guaranteethat small operators/service providers would not be overwhelmed by the "big players" and that themajority would not impose its views on the minority?

The option of entrusting decisions on numbering issues to an industry body composed of majorindustrial players was also considered in New Zealand but was not seen as the most appropriatearrangement in this case. A report prepared by the Ministry of Commerce, in November 1991, proposedfour options for the administration of number resources: a) Telecom New Zealand would remain in chargeof numbering matters; b) a Government regulatory body could take control over numbering policy; c) anindustry forum could solve numbering related issues; or d) a consultative body representing a wide rangeof industry participants, regulators, and user groups could be established to discuss numbering issues andwould be the mediator between the industry and the Government, although the latter would still retain thefinal responsibility. A wider consultation process that took place among the parties concerned revealed apreference towards the setting up of a consultative body to assist in the resolution of numbering issues.The New Zealand Telecommunications Numbering Advisory Group (NZTNAG) was set up inMarch 1993 with membership based on a voluntary basis and has since contributed to the resolution ofnumbering debates.

Other countries consider that numbering resources should be centrally administered byauthorised State agencies. In Japan, numbering issues are studied by specially formulated study groupsunder the supervision of the Ministry of Posts and Telecommunications. These study groups consist ofnew common carriers (NCCs), industry representatives, users and technical experts. Last, but not least,AUSTEL, the Australian telecommunication regulatory body has undertaken complete control overnumbering of telecommunication services from Telestra since July 1991. The Australian case issignificant because, although competition in basic service is still limited (Telestra and Optus operate as aduopoly), AUSTEL has done a lot of preliminary work in the area of numbering and has produced relevantdocumentation on consultation processes, a draft numbering plan, and a survey on users' attitude to theproposed modifications.

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2.2 Numbering policy and planning

Where competition exists, the development of efficient numbering practices requires a wideindustry and user involvement in order for policy makers to identify new issues affecting thetelecommunication sector with immediate impact on numbering, such as the emergence of new servicesand the changes in demand. Normally, such policy functions are within the responsibilities of theregulatory authorities which deal with all numbering planning and administration issues.

In the United States, however, the current trend is for a clear division between policy andadministration development functions. Preliminary discussions over the issue reveal that, in terms ofgeneral principles, all industrial participants acknowledge as primary policy functions the effectiveplanning of numbering resources for future uses, the promotion of industry-wide dialogue over numberingissues and the monitoring of compliance with industry approved guidelines (Bellcore, 1994). On the otherhand, the process of allocation requests, the assignment of numbering resources, and the publication ofallocation records are considered as purely administration functions. Such a distinction is preferred bythose service suppliers who wish for an industry-sponsored organisation to take responsibility fornumbering issues and leave Bellcore dealing with the administrative functions.

In Europe, similar considerations are just beginning to emerge. Most countries agree thatregulators should have an administrative and co-ordinating role and need to guarantee equity andtransparency in number allocation procedures. This, however, does not necessarily impose on them anyobligations with regard to the actual preparation of any new numbering plan. For example, in France,France Telecom has recently prepared a new numbering plan for the future. The plan -- which providesfor all operators and service providers to have access to numbers -- has been submitted to the nationalregulator (DGPT) for consultation and final approval. In Norway, Norwegian Telecom prepared a newnumbering plan and presented it to the country's regulatory authority which has been responsible fornumbering administration since April 1994. There are two basic reasons that justify such policies. First,national regulatory authorities often do not have the resources and expertise required for dealing with thetechnicalities of preparing a new numbering plan since these functions were traditionally among the PTOs'responsibilities. Second, competition in basic service provision, that encourages demand for numbers tobe allocated in a transparent and non-discriminatory manner, is only slowly emerging in most OECDcountries.

Planning is a principal function in number administration. Of primary importance is the efficientuse of existing numbering resources as well as their long-term planning in order to ensure adequatecapacity of number blocks at all times. Regulators state their intentions to ensure that any increase in thenumber supply will be able to cover future needs. Long-term planning activities in a competitiveenvironment also include identification of a possible exhaustion of access codes for carrier selection. TheUnited States has started to experience such a situation, since demand for Carrier Identification Codes forlong-distance and international traffic exceeded all expectations and over 800 out of possible 969 codes arealready assigned. Code conservation is a necessary principle in the administration of numbering resourcesand is necessary to be considered by countries who plan to introduce network competition in the nearfuture. Moreover, liaisons of national regulatory bodies with other regional and international numberingstandards authorities are necessary in order to ensure conformance with international standards and toprovide users with access to future world-wide applications.

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2.3 The administration and management of numbering schemes

Some OECD countries, such as Australia, France, and recently, the United Kingdom havepublished relevant discussion documents where they establish a framework of regulatory intervention inthe numbering area and seek comments on the proposed public conventions for number allocation. In theUnited States, discussions are taking place on the future organisational structure of NANP betweenBellcore and industry delegates. In principle, these documents follow common lines with regard to theresponsibilities of national regulatory authorities over the administration management of numberingschemes. The following functions have been identified as most significant:

a) Number allocation

Regulators in the above countries appear to support the same view: numbers are a nationalresource and as such should be owned by the State. National regulatory authorities should be entrustedwith the management of the resource and can make primary allocations to operators who will then makesecondary allocations to service providers or to end-users. Allocation practices, in general, shouldpromote consumer interests, enhance competition, and ensure the efficient use of numbers. The differencebetween primary and secondary allocation rests on the fact that a primary allocation takes place underdefined principles set by the regulatory authority while secondary allocation remains in the responsibilityof the operator concerned. AUSTEL, for example, in its discussion paper on Numbering administrativeissues clearly states that "AUSTEL will not be involved in day to day secondary allocation procedures butmay require periodic information from carriers and service providers" (AUSTEL, 1992c).

This practice, however, can create the danger of creating similar problems as those experiencedby Mercury in its numbering negotiations with BT. Established holders of an allocation could usediscriminatory sub-allocation practices to their own benefit. New entrants in service provision withparticular needs for "golden numbers" for their services, could be discouraged. The enforcement of morerigid rules that would establish assignment guidelines for secondary allocations, should be seriouslyconsidered by the regulators. Moreover, the establishment of an appeal process function, where theregulator is called to resolve conflicts between primary holders of an allocation and their customers, couldalso provide resolution to the problem. In the United States, contributions by the industry to thediscussions around the numbering organisation structure propose guidelines for appeals processes.Namely, they propose the establishment of a body where the appeals should be addressed and suggest thefunctions it is expected to follow to resolve potential conflicts (Bellcore, 1994).

b) Number reservation

The case of reservation of numbering capacity has been discussed in detail in OFTEL'sNumbering Conventions. According to OFTEL, among the duties of the regulator is the reservation ofnumbering space for future requirements, either for the expansion of existing services or for theintroduction of new services. The steps followed for number reservation are the same as in theirallocation. An application should be made to the regulatory authority and it has to be considered under thesame principles set for responding to an application for an allocation, that is, efficiency in the use ofnumbers, convenience for end-users, and maintenance of effective competition.

However, new entrants should be aware of potential anti-competitive behaviour from the part ofestablished operators. In some cases, carriers or service providers who dominate the market may takeadvantage of their position and reserve large blocks of numbers for their own use. Since the transfer of

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responsibilities from PTOs to independent authorities is a fairly new practice, regulators often co-operateclosely with dominant operators who are more familiar with the characteristics and details of thenumbering plans. In order to prevent anti-competitive behaviour in number reservation safeguards shouldbe introduced. OFTEL proposes that a reservation may be cancelled if the formal request for numbers isnot made within a "reasonable" time period, without however, specifying the exact time period.Regulatory authorities could specify that time period, particularly for requests submitted by operators forexpansion of their existing services, and free the numbering capacity if no formal request has beenreceived prior to the expiration date. They could also consider the possibility of charging for reservationson a number or block basis. AUSTEL, for example, considers the option of charging fees for numberreservations in a way consistent with the Australian Government's Fees Act, which provides for theimposition of a fee for the allocation of numbers. If the fee charged is quite high, it may discourageunreasonable reservations.

c) Publication of numbering schemes

Administrative authorities concerned with numbering should be responsible for the regularpublication of all information concerning the blocks of numbers allocated to particular operators/serviceproviders, the lists of reserved numbers, as well as the lists of all free number ranges. Such publicationsare expected to reinforce clarity and transparency in the assessment of number allocation requests andprovide for better planning of all free codes and numbering blocks. Regulators are also expected topublish periodically lists of area codes, and codes allocated for geographic and non-geographic services.For that purpose, carriers and service providers are required to submit reports over the on-going usage ofprimary numbers allocated to them, usually on a yearly basis unless specified otherwise. The informationrequested includes the current status of primary allocations, that is, the numbers in use, the number ofsecondary allocations, details on numbers transferred by the end-user to another operator (where operatorportability is allowed), any charges applied to numbers relating to the administrative costs of allocation,and the proportion of free numbers from all allocated numbering blocks. Operators are also required toreport on any numbering capacity reserved and, as requested by OFTEL, to justify any continuingreservation.

d) Number trading

The exchange of numbers under a negotiated fee is an issue whose importance is wellappreciated by regulators but where no common policy line has yet been drawn. OFTEL, on the one hand,maintains that because numbering is a national resource "numbering capacity allocated by theNSM (Numbering Scheme Manager) must not be traded" (OFTEL, 1994). AUSTEL, on the contrary,invites comments on its proposed policy guidelines for number trading in Australia. AUSTEL supportsthe argument that since numbers have a certain financial value, expressed by the amount secondaryallocators charge their customers in order to recover their administrative costs, some form of numbertrading is logical.

Golden numbers, for example, are particularly attractive to number trading. Their additionalvalue is based on the fact that they are easy to remember and easy for users to dial (especially if expressedin alpha-numeric form). In a market-oriented system, where there would be a price charged for primaryand secondary allocations of such numbers to service providers and end-users, golden numbers would becharged an amount that would best reflect their market value. The establishment of a trading system forthose numbers may have significant economic benefits for the traders. However, as recognised byregulators, there is always the danger of speculative profit earned from number trading, not only of golden

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numbers but also of ordinary, geographic numbers. Moreover, number trading without the necessaryadministrative process that would identify traded numbers and apply new conditions of use could lead toconfusion.

The issue of establishing an administrative structure that could best supervise and monitornumber trading activities has been raised by AUSTEL as an issue for wider consultation. Theestablishment of a database for number trading administered by AUSTEL is seen as a complicated tasksince it requires information on secondary allocations which AUSTEL will not necessarily obtain. What isseen as a more feasible solution is that of a "certificate" that would verify that the number to be traded hasbeen allocated by AUSTEL to a particular carrier or service provider. AUSTEL considers that theadministrative costs of such a system should burden the trader, but its proposals are open to comments andsuggestions by the interested parties (AUSTEL, 1992c).

A final remark by AUSTEL is that, in a competitive environment trade in numbers is alsopositively influenced by number portability, that is, the ability of customers to keep their numbers whenchanging operators. Unless portability across operators becomes possible, users will be "locked-in" toparticular operators. Moreover, access to any other number range may be constrained by the fact thatspecific numbering ranges would be allocated to particular carriers/service providers. Portability acrosslocations, which permit users to keep their numbers when changing locations, may also facilitate trade innumbers between urban and sub-urban areas. For example, a company with headquarters in a metropolitanarea and branches in the country may trade a non-metropolitan area number where one of its branches islocated, and use it in its city headquarters. However, this means that users have to come to terms with theidea that information on the location and, to some extent, on communication charges may not be apparentfrom the number being called under such a scheme. The issue of portability will be discussed further in afollowing section.

e) Charging of numbers

The issue of charging for numbers is being given consideration by regulators. The reasons aretwofold: first, it is recognised that the transfer of numbering responsibilities from a PTO to an independentauthority involves considerable administrative costs that have to be covered preferably by those who makeuse of the numbering space and make profit out of it. Second, certain numbers contain an intrinsic valuewhich has to be explored and assessed accordingly. In a market environment, golden numbers shouldnormally be worth more than ordinary numbers because of their limited availability and the extra valueassociated with the services they provide access to. Similarly, direct dial-in numbers (DDI) may have tobe charged a fee that would correspond to the opportunity cost incurred when a user holds on to an entirenumber range at the expense of other potential uses.

The shift in the management of national numbering schemes from the incumbent PTO to anindependent authority involves extra public expenditure. These costs are associated, for example, with thehuman resources hired for dealing with numbering issues, the external consultations that may be needed inorder for the regulator to frame policy, and the representation of the country in regional and internationalstandardization fora.

So far, the PTOs who have been in charge of numbering schemes have been sponsoring alloperational functions related to the assignment of numbers to users and service providers. In return, theyused to charge nominal fees for certain facilities such as, the search for special PSTN numbers, PSTNnumber reservation, and the connection, use and reservation of DDI numbers. Depending on the

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sophistication of the network there may be other charges imposed for the use of particular features, such as"call forward" function.

The creation of independent authorities in charge of numbering administration in several OECDcountries has raised concerns over their funding. A traditional approach has been that the expenses ofregulators were covered by the State budget. This has been the case in countries such as theUnited Kingdom, the United States, and Finland. The Telecommunications Administration Centre (TAC)in Finland, which serves as the regulatory body in the country, has recently adopted an alternativeapproach. Since the Government decided that TAC should develop an autonomous financial structurefrom 1995 on, regulators were forced to consider alternative options to fund their activities. TheDepartment of Telecommunications and Standardisation of TAC (DTS), which is the body responsible forthe administration of the Finish numbering plan, thought the most appropriate solution was to impose feeson the right of use of numbers. According to TAC, the yearly expenses of the DTS approximate14.4 million FIM (MFIM), of which 13.1 MFIM are expected to be covered out of numbering fees.Moreover, numbering fees are expected to contribute to the membership costs of TAC in internationalorganisations such as the ITU, ETSI and ECTRA.7

From a theoretical point of view, it may seem fair that end-users should pay for the cost ofmanaging numbering space since they benefit most. The majority of OECD countries have not givenmuch thought to this concept since few countries have set up number administrative agencies independentfrom the PTOs. There are other issues associated with the principle of cost recovery which should also beaddressed.

A first issue is whether administrative costs should be levied on all categories of users or, as inthe case of special numbers, certain users should be exempted from these charges. The case again refers toresidential and/or government users. In Finland, for instance, all subscribers will be subject to an annualfee for the number(s) they occupy and it is expected that this will cover more than half of the regulator'sannual administrative expenses. The issue has also been raised by AUSTEL in respect of allocationcharges for ordinary PSTN numbers issued to the public at large.

The Australian Fees Act of 1991 provides a framework of charging principles for the primaryand secondary allocation of numbers for public telecommunication services. In particular, the Actprovides for a fee to be set by the regulator and to be paid to the Australian Government for the primary orsecondary allocation of an "ordinary" number. It is unclear whether the fee should recover AUSTEL'sadministrative costs and/or be equivalent to a tax for the use of a national resource. AUSTEL can act onbehalf of the government and impose charges on carriers/service providers for the use of numbering space.In an updated document over its policy on charging for numbers, AUSTEL sets charging principles for therecovery of administrative costs of secondary and tertiary allocators. It recognises that carriers and serviceproviders have considerable administrative costs when dealing with number searches, verification, andallocation procedures on behalf of their customers and that they should be able to recuperate these costs.With regard to its own administrative costs, AUSTEL states:

"This Policy may be amended in the future to incorporate provisions for AUSTEL tolevy charges to recover its administrative costs, and to provide a mechanism for theCommonwealth to receive a proportion of charges levied by secondary and tertiaryallocators to recover the value intrinsic in numbers." (AUSTEL, 1994a).

AUSTEL does not specify the level of charges that can be imposed by secondary allocators.Instead, it states that such charges "must be related to the administrative costs". Such a practice increasesthe danger for service providers and end-users being charged unreasonably high prices for number

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allocations. It may also allow secondary allocators to subsidise their operations out of the administrativecharges imposed on their customers. A policing mechanism is necessary in this case to ensure that thecharges imposed for the recovery of administrative expenses do not represent a new source of profit andthat they should only be levied to ensure efficient allocation of numbers. AUSTEL's policy also calls for"no restrictions on the number ranges for which secondary or tertiary allocators may levy charges forrecovery of their administrative costs..." (AUSTEL, 1994a). Therefore all users are subject toadministrative charges irrespective of the type of service they use. However, special provisions can bearranged for certain categories of users, but this is up to the regulator to decide.

The case of AUSTEL is an example of a policy on charging principles as applied to secondaryand tertiary allocators, that is to operators and service providers who make allocations to their users. Theformer are the primary allocators who should normally pay fees directly to the administrative authority forany block of numbers they reserve. The question that arises here is under which criteria should theindustry, itself, contribute to the administration cost recovery. Should the same principles apply on anequal basis to all operators/service providers?

The discussion of this matter in the United States is based on the notion that any costs recoveredshould relate to the administrative burden placed on the regulator "due to the type of resources used,requested or assigned to any entity or class of entities" (Bellcore, 1994). In the United States case, it isassumed that an industry representative body oversees the development of NANP and that the industryshould be responsible for sponsoring this new organisation. Such an approach depends on all industryentities reaching an agreement on the formula used for calculating prices. This is an approach worthconsidering, and which, when operating properly, may guarantee a fair and equitable funding mechanism.

Another issue that deserves attention is whether cost recovery principles should be applied tocover the costs of additional numbering related functions other than management and administration, as isthe case in some OECD Member countries with spectrum fees. In Japan, for example, new spectrum feesare intended to pay for the creation of a transmitter database (OECD, 1993). A similar idea in the case ofnumbering would imply that numbering fees pay for the creation of databases for portable and/or personalnumbers that could facilitate the introduction of personal numbering services. In the latter context, theuser is assigned with a single personal number which can be accessed at any terminal of his choice, eithermobile or any fixed network termination point regardless of location. From a technical point of view,OFTEL suggests that one way to accomplish portability across operators would be the creation of specialdatabases carrying only portable numbers. Such a task would involve considerable technical andadministrative costs. Given that portability is primarily enjoyed by corporate users and competitiveservice providers it seems only fair that they, at least, contribute to the costs of introducing portability.Parallel ideas could be proposed regarding the recovery of costs for the administration of a centralDirectory Information database, or the funding of research into the area of personal numbering.

Some countries may also consider using revenues from numbering fees for purposes which donot relate directly to any numbering activities. Such subsidisation practices should be avoided.

In general, the issue of pricing numbers is fairly complicated. Regulatory authorities in someOECD countries have just started considering the issue but no decision has been taken in terms of gettingrevenue from numbers.

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2.4 Portability of numbers

The issue of number portability is currently being examined by regulators and technical expertsin OECD countries, such as the United States, Canada, the United Kingdom, Australia and Finland. Thereare two basic reasons for such considerations. First, the evolution of such facilities as teleshopping,freephone, and premium rate services demonstrate an increasing reliance of sales and marketing activitieson telecommunication services (OVUM, 1992). The numbers that are associated with the provision ofsuch services are valuable to service providers and their customers and any change in their format mayhave significant impact on the volume of incoming traffic and may cause loss of revenue for businesseswhich are dependent on their telephone numbers. Second, the growth of competition in both networks andservices has raised concerns about unequal opportunities for new entrants in a market, particularly since itis compulsory for customers who want to shift completely to another carrier/service provider to changetheir numbers. Market researchers in Europe have clearly indicated that the lack of number portabilitybetween operators has acted as a barrier to the development of competition because it restrains users fromshifting to other operators/service providers.8 Prior to analysing the regulatory aspects of portability it isimportant to identify the following types of portability and the potential user demand.

a) Types of portability

i) Location Portability: This type of portability would enable users to maintain their telephonenumbers when changing geographic location either in their local area (small distances) or even anywherewithin a country. At present, most PTOs allow users to keep their current local numbers when they movewithin their local exchange area. In general, the provision of location portability becomes increasinglymore difficult when users move outside their local charge areas. Moreover, other alternatives such as callforwarding facilities, are effective equivalents to location portability on fixed networks and are lessexpensive. Market researchers, however, in Australia and the United Kingdom have shown that locationportability is not very popular among users, especially when they move long distances within theircountry. Retaining the existing geographic information of numbers and relating number prefixes withpossible tariff information is a practice still favoured by users, even though some suggest currenttechnology trends imply increasing independence between distance and call pricing.9

ii) Service portability: This type of portability would enable users to shift from one type ofservice to another, for example from a wireline to a wireless service, and keep their existing uniquenumber. If both fixed and mobile network services are provided by the same operator, the interrogation ofa single database which will contain all portable numbers can route the call accordingly. The casebecomes increasingly complicated, however, in a competitive environment where more than one operatoris involved. Today, a related version of this type of portability is available in the United States and theUnited Kingdom in the form of personal numbering services. AT&T in the United States provides apersonal number service as a value-added, carrier specific service. It uses an intelligent network platformand assigns personal numbers to users that can follow them on any terminal of their choice as long as callsare routed through AT&T's switched network.10 Although the terminology varies a lot between differentparts of the world, it is generally understood that Personal Number Services differ from PersonalCommunication Services. In the latter, calls are routed to a specific terminal which has "portable identity"(Tucker, 1994) while in personal numbering services numbers are assigned to persons and calls can beanswered from whatever terminal users are near at the time of the call.

At present, there is no harmonisation among countries with regard to the numbering spaceallocated to personal numbers but revisions in national numbering schemes propose the allocation ofspecial number ranges for this purpose.11 Personal Numbering service is the first step to the future

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UPT service provision where, according to the initial ITU definition, a user who has been assigned apersonal number, can be accessed anywhere, on any terminal type, any network type, through any networkoperator.12 When UPT becomes a reality potential UPT subscribers will be able to benefit from serviceportability and keep their most publicised numbers when they move to UPT.

iii) Operator portability: In a fully competitive environment, portability across operators wouldenable users to keep their existing numbers when changing carriers/service providers. For example, in theUnited Kingdom market where competition exists at the local level, users would be able to subscribe tothe carrier of their choice without having to change their numbers, as is the practice today. The samewould apply to any form of wireline or wireless network. At the moment it is possible for users to shiftbetween different carriers on a call-by-call basis but this method is not without significant cost. Operatorportability is the most desirable type of portability by users and the most frequently discussed amongregulators.

In a 1989 document, OFTEL expressed the view that "public network operator portable numbersremove a potential major constraint on the development of competition in local telephony services. Thescale of such a benefit is highly uncertain, but could run into several hundreds of millions of pounds perannum" (OFTEL, 1989). In 1991, the then Director General stated that transferability of numbers betweenoperators is desirable in ensuring effective network competition and that the new national numberingscheme should provide for portability between operators and possibly between geographical locations.13

However, BT's licence required the completion of a cost/benefit analysis prior to the introduction ofportability. Such a study was completed in the United Kingdom in March 1994 and, according to OFTEL,the results "are both positive and robust on five of the six technical options considered" for implementingoperator portability (Sellers, 1994).14

Other countries such as Australia, Finland and Canada are also considering to introducingoperator portability in the near future. In Australia, AUSTEL has established a specialist working groupwhich studies the technical requirements for implementing operator portability in non-geographic services(mobile and special service numbers). It has also invited comments from all sides concerned over the bestway to achieve portability within the same geographic area. In Finland a Study Group has been formed tostudy portability issues, with operator portability being at the top of the list, and first results are expectedwithin 1994. Canada, following the United States practice, is currently working on the introduction ofportability on freephone services.

The United States has been the first country to introduced operator portability. Since May 1993operator portable numbers have become available in the United States in Freephone services.15 TheFreephone market in the United States has seen exceptional growth estimated at 10 per cent annually(Mercury, 1993). AT&T alone states that it derives 40 per cent of its service revenues from toll freecalling.16 With the advent of portability in 800 service the use of Freephone numbers increased by 300 percent (Conners, 1994). Large users of 800 service are keen on the idea of being able to choose the carrier oftheir freephone number without having to change their numbers since these are their major sales tools. Theresults of a survey commissioned by MCI Communications prior to the introduction of 800 serviceportability showed that users believe that portability will increase competition and have a positive impacton costs and the availability of new 800 features. Large users were also more likely to conduct a review oftheir 800 service once portability becomes available.17 The United States industry, on the other hand,wishes to see further expansion of portability to other services and has requested NANPA to place numberportability issues high on its agenda due to the time required to deal with all technical and economic issuesinvolved. Individual carriers suggest that the industry should first gain experience with 800 numberportability and perhaps cellular number portability before it implements portability at the local level.18

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b) Regulatory aspects of portability

From a technical point of view, number portability implies significant routing changes toexisting network architectures. For its implementation it requires either the use of identical information inall databases owned by individual operators/service providers, or high level of intelligence in the networkso it can identify numbers from digit analysis and route calls to the correct carrier/service provider. It isalso anticipated that further deployment of technologies, such as the Advanced Intelligent Network (AIN)and Signalling System No 7 (SS7) capabilities across the telecommunication industry, will facilitate theimplementation of portability. The above options have been discussed with regard to operator portability,which is the one currently of most interest to regulators and users. Location and service portability,because of their nature, are seen more as cases which should be discussed between users andcarriers/service providers (Bellcore, 1993a and OVUM, 1992). Moreover, the early implementation ofpersonal number services by individual service providers indicates that the industry will play an importantrole in any future discussions over service portability issues. Discussions within the ITU-T Study Groupsover the world-wide operation of personal numbering services, have shown that a truly global personaltelecommunication service does not depend solely on regulatory and standardisation bodies but allindustry participants.

The idea of introducing a single database shared among operators/service providers for therouting of calls has initiated lengthy discussions among regulators and telecommunication specialists.Apart from the technical constraints surrounding such a service, the main concern around this proposal hasbeen twofold: first, decisions must be taken regarding the most appropriate body to undertake theimplementation and administration of these databases; second, suitable regulatory actions need to beestablished so that they could guarantee a fair sharing of all the operation and administration costsassociated with portability among the parties concerned.

With regard to the organisation of central databases, it has been proposed that national regulatoryauthorities, together with special study groups, should start preparing the ground for their implementation.The Australian Telecommunications User Group has gone even further by proposing the establishment ofan independent national telecommunications database especially for the implementation of Freephonenumber portability, operator portability and for the future UPT services (AUSTEL, 1992a). On the otherhand, concerns have been raised by OFTEL that the routing of calls to a common database shared byoperators entails centralisation of activities when greater diversification and competition at all levels arebeing encouraged (OFTEL, 1993). Bellcore, in its second proposal on the future of numbering in WZ1,deals with portability issues and expresses its concerns over the implementation of shared databases andthe burden of operation and administration costs. However, no particular guidelines have yet been drawnin that direction apart from the planning of "800"-number portability. A common view, shared by manybusiness users in the United States, is that country-wide operator portability would probably cost "severalhundred times" the cost of "800" databases and is further constrained by the slow steps in the deploymentof the Intelligent Network.19

The high costs associated with implementing operator portability have led regulators to considerthe case on the grounds of the costs involved versus the anticipated benefits. For example, new operatorssupport the idea of portability because then users overcome the barrier of having to change their numberand they can migrate easier from the incumbent. In that respect, operator portability serves as a stimulusto competition and assists in the development and growth of new entrants. On the other hand, a particularconcern has been expressed over the quality of services using portable numbers. The latter has more to dowith the extra time necessary for database enquiries, which leads to further delays in call set up time. Ithas also been argued that a possible drawback in operator portability is the fact that the old line may not beavailable for use at the time when the number is being transferee to another operator.20

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Measuring the costs and benefits of operator portability is definitely not an easy task. Measuringdemand for operator portability, however, can be a first indicator of the kind of strategy that regulatorscould follow in that area. It has been suggested that most requirements for operator portability will come(a) from where competition at the local network exists, (b) from mobile operators, and (c) from customersof special services such as Freephone or premium rate services (OVUM, 1992). Without neglecting theimportance of portability to residential users, most existing demand usually comes from large users whobenefit the most by keeping their advertised numbers. Many of these users have been allocated largeblocks of numbers or DDI numbers. An interesting issue for regulators to investigate is whether limitedportability of large blocks of numbers may be preferable from a technical and economic point of view andshould be considered as a first step in the introduction of full portability at a later stage. Another approachsuggests that portability arrangements could take place together with the take up of a new service underthe condition that certain numbers in designated ranges for services such as freephone, mobile and basictelephony, would be reserved for operator portability (OVUM, 1992).

In the end, purely technical problems in implementing portability will be up to the operators tosolve. The costs, however, should be equally distributed among the parties involved. The option of usinga market-based approach regarding the sharing of costs, so that the benefiting operator would haverelatively higher financial obligations than the "losing" dominant operator, may be unfair for new entrantswith small market shares. Another option may permit competitors to share these higher costs with theincumbent.

Overseeing a fair allocation of portability costs among operators is a key responsibility ofnumber regulators. The latter are also responsible for overseeing any special charges imposed on end-users for the recovery of portability costs. These charges should normally reflect the real technical andadministrative costs involved for the provision of the facility. Regulators in most countries whereportability has been an issue have not yet decided on any concrete actions for policing the area. It isrecognised that in location or service portability, and where services are provided by a single operator,transaction costs are limited and operation costs for implementing portability fall on the same company,since an operator makes use of its own databases. Thus, the regulator's role will be to define specificlevels of charges for cost recovery of providing portability, or to approve the charges set by the operatoron the basis that they express real market values.

In the case of operator portability, however, the situation is more complicated. The involvementof more operators make transaction costs higher and administrative costs more difficult to estimate. Forexample, "losing" operators may consider charging their ex-customers a compensation fee in order tocover some of their administrative expenses of number change. AUSTEL has also raised the issue thatnumber allocation procedures should be arranged in such a way that they are able to accommodate thefuture implications of portability. AUSTEL uses the example of a company which has been allocated ablock of numbers and has been charged for the value intrinsic of these numbers. If that company wants tochange carrier, the same number block will then be associated with the new carrier. The point to make isthat, with the advent of portability, regulatory mechanisms should guarantee fair accountability for the useof numbers by different operators so that no carrier would be charged for the use of numbers that areassociated with the services of a competitor (AUSTEL, 1992c). OFTEL has found a way to deal with thisproblem in its draft Numbering Conventions. According to OFTEL:

"If a majority of numbers in an exchange area becomes transferred, the NationalScheme Manager may with the agreement of the operators concerned reallocate toanother operator the existing number range of that area and allocate a new range tothe original operator for new numbers in that exchange area." (OFTEL, 1994).

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A number of other issues evolve around portability and, certainly, more will come to the fore assoon as portability starts to be implemented on an industry-wide basis. Regulators should be prepared toeffectively deal with any kind of obstruction caused by incumbent operators since portability is bound toreduce the latter's dominance in the market. Such mechanisms could be, for example, the setting of aspecific time limit within which a carrier has to complete the re-direction of number after a user's request.

2.5 Directory services

a) General issues

Directory service provision is closely related to numbering issues since directories are theprimary source of information of numbers for users. In a competitive telecommunication market, wheremore than one operator provides basic services to specified areas, it is normally expected that operatorsalso provide their own directory enquiry services. Such services depend on a central database which is thesame as that used by operators for the routing of calls. The building up of such a database is a costlyprocedure for new entrants, especially when they have not yet established themselves in the market.Moreover, the provision of more than one database may confuse customers who seek to get information inthe easiest and most practical way. Thus, competitive carriers are more and more dependent on theincumbent operator for access to its directory database. This situation has led to considerable debates overhow directory services should operate in a competitive market. The following issues have come to thefore:

• Who should own the information in directories?

• Who should hold and run the database for directory services?

• Under what terms and conditions should operators have access to and make use of thatdatabase?

b) The United Kingdom experience

In the United Kingdom, the issue of "equal access" to directory services has been broughtforward by Mercury. According to Mercury, BT is acting in an unfair and discriminatory manner byproviding no justification for its charges to competitors for the use of its database and by using differentdata entry processes for data entries of other operators, introducing further delay in updating informationand putting additional expenses to the process (Mercury, 1993). Other operators have also expressed theirconcerns that the United Kingdom market for directory services is unduly restricted and that the provisionof directories should not be associated with telephone subscriptions (Sellers, 1994).

OFTEL is well aware of the fact that new operators can fulfil their obligation of providingdirectory enquiry services only by having access to BT's directory database and is equally concerned aboutBT exercising proprietary rights over the use of that database. For these reasons, OFTEL has beenexamining the issue of directories in parallel with the numbering issue. Its approach, however, differsfrom that over the administration of numbers. Instead of proposing a take over the directory database anda central administration of the national directory by OFTEL it has adopted a more market-orientedapproach.

OFTEL has the view that the operation of directory services includes less policy and morecommercial issues to be considered, therefore, it strongly supports the idea of operators reaching

26

commercial agreements over the use of databases (Sellers, 1993). Another option favoured by OFTEL isthe setting up of a separate database company which would provide unbranded "core" directories. In theUnited Kingdom, licensing of independent bodies to provide telephone directories using informationsupplied by operators is currently being considered. However, this option would involve modifications inBT's licence since its current status does not allow the provision of directory services by entities notinvolved in service provision (Sellers, 1994).21 Furthermore, such an approach entails a number ofconsiderations around privacy issues, for both residential and business customers.

In March 1994, OFTEL announced its short and long term policy guidelines with regard todirectory enquiries. These include (a) a formal examination of BT's charging practices for handling andaccessing customer data, (b) a close investigation over the option of establishing a separate databasecompany to provide numbering information, and (c) a consideration of the need to modify existingoperation licences in order to ensure that any future actions in the directories area will be legallyauthorised.

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CHAPTER 3

INTERNATIONAL AND REGIONAL REGULATORY SYSTEMS AND NUMBERINGMANAGEMENT IN OECD MEMBER COUNTRIES

Numbering may be considered as a national resource, however, in order to standardisecommunication on a world-wide basis, compatibility of national numbering plans is necessary.Furthermore, the significant contribution of an integrated numbering plan to the promotion of trade andcommerce among countries with common economic interests has been demonstrated in the case of thecountries participating in the North American Numbering Plan (NANP).

The area served by the NANP covers what is described by ITU-T (previously CCITT) asWorld Zone 1 (WZ1). It includes almost all North America countries (i.e. the United States, Canada,Bermuda, the Caribbean) excluding Mexico. It is a common view among telecommunication-relatedbodies within WZ1 that NANP is a unique source and has contributed significantly to the growth of theNorth American telecommunication industry. NANP essentially provides common dialling patterns acrosscountries who participate in the scheme, facilitating the development of cross-border networks andservices with benefits for both users and service providers. Significantly, Téléfonos de Mexico, in itsproposal for a long term numbering plan in Mexico, has considered participating in the NANP (Bellcore,1993a).

The experience of NANP has influenced the European Commission to start working on theestablishment of a common European Numbering Space (ENS) for services for which there is pan-European demand. The results of a recent study carried out for the Commission as part of its numberingpolicy initiatives, showed that the market potential exists for Europe-wide operation of services such asfreephone, calling card and premium rate services. Service providers in Europe claim that the absence ofpan-European networks has hindered the development of the services sector. If pan-European numbers forcertain services were available today, service providers would have an immediate 15 per cent increase intheir revenues. If pan-European numbers were to be offered in five years time then an increase of50 per cent in business activity is estimated (O'Loughlin, 1994).

Co-ordination of numbering schemes at the regional and international level allows for thedevelopment of economies of scale in the telecommunication industry and therefore contributessignificantly to the diffusion and promotion of new services. In that respect, numbering can be regarded asan "international resource" the administration of which is entrusted to supra-national regulatory bodies.

3.1 The International Telecommunication Union

Within the International Telecommunication Union, Study Group II within theTelecommunication Standardization Sector (ITU-T) is responsible for numbering issues within the contextof its work on Network operation.

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National numbering schemes tend to conform, to the maximum possible extent, withRecommendations approved by the ITU. Although Recommendations have no binding effect, they arewidely adopted by Member countries and are accepted as applicable international standards. Thefollowing Recommendations have formed the basis of national numbering plans:

• Recommendation E.160 -- Definitions relating to national and international numbering plans;

• Recommendation E.161 -- Arrangements of figures, letters and symbols on telephones andother devices that can be used for gaining access to a telephone network;

• Recommendation E.163 -- Numbering plan for the international telephone service;

• Recommendation E.164 -- Numbering plan for the ISDN era;

• Recommendation E.165 -- Timetable for co-ordinated implementation of the full capability ofthe numbering plan for the ISDN era.

Recent work within Study Group II has been focused on the definition of standards for newservices that emerge and on the resolution of problems regarding their world-wide implementation. Muchattention has already been given to the concept of Universal Personal Telecommunication service (UPT).

Although not yet officially defined by the ITU, UPT is envisaged as an integrated system ofservices, where personal numbering will be the core mechanism around which a number of essential and,later on, optional features will develop, such as call routing, call screening, call pick-up, support of dataservices etc. A personal number provides users the ability to be accessed at any location, irrespective ofthe terminal type. UPT in its wider context would also permit universal number portability acrossoperators, so a user could be reached at any location world-wide through the operator of their choice. InMarch 1993, the World Telecommunication Standardization Conference in Helsinki approvedRecommendation E.168 on the application of the E.164 numbering plan for UPT. This Recommendation,however, is currently under revision since a number of issues emerged which reflected the need for furtherconsultation. In addition, ITU-T Study Group II is working on the service description and operationalprovisions for UPT (Rec F.851) and it is expected that a full Recommendation will be proposed forapproval at the end of 1994. Discussions over UPT implementation highlight the fact that, as a serviceshifts from the national to the global level, a set of issues evolve that require further investigation. In thecase of UPT, the major question is who could undertake the role of global number administrator. Thisremains an issue for future study within ITU-T.

Another area of research for Study Group II is the implementation of a Universal InternationalFreephone Service (UIFS). The service is envisaged as the global version of the current nationally-basedFreephone services and aims to provide customers with a single number that would be the same around theworld. This would give companies a competitive advantage since it would permit them to advertise theirproducts and be accessed by their customers from any part of the world through that single number. Thedescription for the service is still in its development phase and the option of portability has to beexamined.

Currently, work has concentrated on the structure of the UIFS number. Consensus on this issueis still lacking since the United States and Canada support a 7-digit fixed format, on the same lines as theone currently in use in WZ1, while the majority of the world favour a fixed 8-digit format that canguarantee a smooth and equitable passage from national IFS implementations to the UIFS. Across theworld, Freephone services use variable number lengths ranging from 3 to 7 digits. A universal 8-digit

29

format could accommodate all existing national schemes by simply adding additional digits to thenumbers.

The administration of a global operating Freephone service is another issue that needs to beconsidered. A first step has been made with the acceptance by the ITU to undertake the role of globaladministrator for UIFS and perform the central numbering registrar function. However, further work isnecessary in order for the administrative procedures to be clearly defined. Undoubtedly, this will not be aneasy task, given the major economic and political interests underlying this issue. Still, the ITU is the onlybody whose international authority and expertise can guarantee a fair and equitable global numberadministration for UIFS.

The 1993 World Telecommunication Standardization Conference identified numbering as amatter that requires urgent attention. A specific question regarding the applications of numbering andaddressing plans for fixed and mobile services was allocated to Study Group II as an area of study for theperiod 1993-1996. The focus should be on the provision of numbering capacity "for new applications andmeans to accommodate multiple carriers within a country when this affects international relationships"(ITU-T, 4/1993). In parallel with the implementation of global service applications, a number of relatedprojects are also being considered. These include, for example, a further review of RecommendationE.164; a redefinition of "country codes" in order to establish new eligibility criteria for country codesassignment; a study on the numbering requirement of multiple carriers/service providers operating withinnational boundaries; and the numbering and addressing implications stemming from the evolution of newservices, such as Global Virtual Network Services.

3.2 European regulatory initiatives

The work of the European Commission (EC) in the area of numbering has concentrated onharmonisation for common access to certain services across Europe, as well as, on the shaping of nationaland European numbering policies.

In July 1991, the Council of Ministers adopted a Decision on the introduction of a singleEuropean emergency call number. According to the Decision, Member States are obliged to introduce thenumber 112 in their public telephone networks to provide for access to emergency services. This numberwill operate in parallel with other existing national emergency call numbers and Member States shouldconform with the Decision by 31 December 1996, at the latest.22

A second initiative for Europe-wide harmonisation is the Council Decision of 11 May 1992 onthe introduction of a standard international telephone access code. The Decision places a legal obligationon Member States to ensure that the code "00" is introduced in their public telephone networks as astandard international access code, no later than 31 December 1998.23

With regard to the numbering responsibilities of Member States, the Council Directive on theapplication of Open Network Provision (ONP) to voice telephony includes an Article which coversnumbering issues.24 In particular, Article 21 provides for the following: a) the control of nationaltelephone numbering plans by the national regulatory authorities and the allocation of numbers andnumber ranges through objective, transparent and non-discriminatory procedures; b) the publication of themain elements of the numbering plans by the regulatory authorities; and c) the promotion by the nationalregulatory authorities of activities related to the use of European numbering schemes for the provision ofEurope-wide services.25

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The idea that the creation of a European Telephony Numbering Space (ETNS) would facilitatethe development of Europe-wide applications is further endorsed in the Council Resolution on thepromotion of Europe-wide co-operation on numbering of telecommunications services.26 The Resolutionrecognises that in order for Europe-wide applications to develop there is a requirement for increased co-ordination in the management of numbering schemes at the European level. For this reason, it encouragesthe development of a pan-European framework of co-operation on numbering issues among nationalregulators, industry representatives and user groups. The European Committee for TelecommunicationsRegulatory Affairs (ECTRA) has been invited to undertake the role of general co-ordinator of the proposedscheme.

The ECTRA Project Team on numbering was set up in July 1992 and since then its work hasbeen concentrated on the establishment of a regulatory framework around the requirements forharmonisation and standardisation in European numbering. ECTRA has set up a EuropeanTelecommunications Office (ETO) responsible for the day-to-day issues on European numbering. Thesewill be handled by its numbering department ETO-N. The main responsibility of ETO-N, however, willbe to bring numbering issues out of the closed standardisation bodies and to develop a wider discussionforum where all parties concerned will be able to participate on an equal basis and present their views.Open consultation of interested parties is regarded as an essential first step for a Europe-wide co-operationon numbering.

3.3 Numbering in the OECD Member countries

This section summarises the responses of most OECD countries to a questionnaire sent out inAugust 1993 to all Member countries in the context of the aimed Communications Outlook. Threequestions related to numbering were included in the questionnaire. From the information collected it isapparent that the issue of efficient administration of numbers attracts increasing attention from regulators.The following questions were included in the questionnaire:

Who is the regulatory authority responsible for telephone numbering?

As indicated in Figure 1, the Ministry of Communications is usually the highest authority ontelephone numbering in most countries. The Ministry, however has only plenary jurisdiction overnumbering while the actual planning is being done by the incumbent PTO. Thus, the PTO still has therole of general numbering administrator whose proposals are subject to the Ministry for approval.Switzerland and the United States illustrate this case. Australia, Denmark, Finland, Italy, Norway,Portugal and Sweden have transferred numbering responsibilities from their PTOs to a regulatoryauthority, which, in most cases is a division of the Ministry. As stated in the ONP Directive for voicetelephony, the countries of the European Union (EU) are called to transfer responsibilities over thedevelopment of telephone numbering plans to their national regulatory authorities in order to provide forfair competition. The above EU countries have already seem to be complied with the Directive whereasother countries, such as Spain, the Netherlands, Belgium and Greece waiting for the Directive to come intoforce before implementing it, in order to complete the passage. New Zealand, on the other hand, seems tohave successfully adopted the "wider consensus" approach. The establishment of NZTNAG and thebroadening of debates among service providers, user groups, and regulators has limited the formalregulatory role of the Ministry.

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The second question was:

If competitive service provision is allowed can customers take telephone numbers with them ifthey change operator (e.g. transfer 800 numbers, cellular numbers?)

The responses of Member countries are presented in Annex 1 of the report. The question refersto the portability issue and attempts to measure the demand for this facility in OECD countries. Mostcountries have not responded to the question or have stated that the question is not relevant because thereis only a single fixed-link carrier.

Figure 1. Organisations responsible for the regulation of numbering in OECD countries

Country Authority

Australia Australian Telecommunications Authority (AUSTEL)

Austria Ministry of Public Economy and Transport

Belgium Belgacom

Canada Ministry of Industry

Denmark National Telecom Agency

Finland Telecommunications Administration Centre (TAC)Ministry of Transport and Communication

Germany Federal Ministry of Posts and Telecommunications

Iceland Ministry of Communications

Ireland Department of Transport, Energy and CommunicationsTelecommunications (Regulatory) Division

Italy National Regulatory Authority (N.R.A.) -- PTT Ministry

Japan Ministry of Posts and Telecommunications

Netherlands Ministry of Transport and Public Works

New Zealand Telecom, New Zealand Telecommunications Numbering Advisory Group(NZTNAG), Ministry of Commerce

Norway Norwegian Telecommunications Regulatory Authority

Portugal Instituto das Comunicaçoes de Portugal

Spain National Regulatory Authority (from 1998)

Sweden National Telecom Agency (Telestyrelsen)

Switzerland Federal Office for Communications (OFCOM), Telecommunications Operators

Turkey Public Telecommunication Operator (PTT)

United Kingdom OFTEL (from June 1994)

United States Federal Communications Commission (jurisdiction), Bellcore (administration)

Source: OECD.

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In Finland, Sweden, the United Kingdom, Canada and the United States, the issue of portabilityis under consideration, whereas in Norway, technical constraints are seen as major obstacles. However, itis anticipated that the portability issue, in most countries will rise in parallel with competition in basicservice provision. Experiences from countries that have already dealt with the issue may be useful to othercountries in terms of indicating the potential technical, regulatory, and administrative constraints ofimplementing portability.

The third question was:

Have there been any recent initiatives in the area of telephone numbering in your country?

Most countries seem to have been engaged in reforms in their numbering plans. In Australia,the Netherlands, Portugal, and the United Kingdom new plans have been finalised and changes areexpected to occur within the next few years. Turkey, Norway and Finland have just had the experience ofintroducing new numbering arrangements, while Iceland and Belgium have recently harmonised theirnumbering schemes with the common EU initiatives regarding the introduction of a pan-Europeanemergency call number and a single international access code. It is important to note that EFTA countriesseek to conform with EU Directives for pan-European numbering practices.

In Canada and the United States, major changes are going to take place in 1995 in response tothe need for long-term planning to accommodate the emergence of new trends in telecommunicationservices. A particular characteristic of the proposed numbering plan is the availability of 640 new"interchangeable" Numbering Plan Area (NPA) codes. The term NPA is equivalent to the ITU-T termNational Destination Codes (NDC) and indicate a particular geographic area. Calls within that area aremade by dialling the subscriber's 7-digit number which consists of a 3-digit Central Office (CO) code andthe Station Number. For calls between NPAs subscribers should dial first the 3-digit NPA code followedby the subscriber's number. So far, there is no trunk prefix to indicate access to the long-distance network.Instead, the network distinguishes between a call within an NPA and a long-distance call by examining thesecond digit dialled. A second digit "0" or "1" indicates a long-distance call whereas digits "2" to "9"indicate CO code within the NPA. The new NANP provides for a trunk prefix 1 to be introduced for long-distance dialling so that CO codes and NPA codes can be used "interchangeably" and have, both, a seconddigit from "0" to "9". This expansion to a new format will give 640 additional NPA codes to be used inthe NANP. Bellcore is currently investigating methods for efficient allocation of the new resources.

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CHAPTER 4

CONCLUSIONS AND POLICY RECOMMENDATIONS

Many OECD Member countries are currently reviewing their numbering plans, or are in theprocess of doing so in the near future. The evolution of new services, on the one hand, calls for anexpansion of national numbering plans in order for adequate resources to be created to accommodate newapplications. The advent of competition, on the other, has given numbering important economic andcommercial dimensions which have to be fully realised by policy-makers.

To a large extent, discussions over numbering management translate into who has control overaccess to number resources and, thus, who controls access to emerging new markets where revenuepotentials are high (Hawkins, 1993). Numbers can become an anti-competitive tool in the hands ofincumbent PTOs which would like to see their dominance extended in other profitable areas apart frombasic telephone service provision. Experience from countries where competition has been introducedindicates that numbering is another area where monopoly structures can create problems to competitors. Ifpolicy initiatives had been taken earlier, many of the operational difficulties new entrants faced may havebeen overcome.

In countries where competition is just beginning to emerge, it will be all the more important toplan ahead and implement policy measures that would guarantee efficient allocation of number resourcesto all players in the market. From this standpoint, any changes made in numbering plans in order toincrease their capacity and create sufficient space for new applications should be accompanied byappropriate changes in the methods of allocation of numbers. Numbering should not be seen as simply atechnical matter, nor should it be assumed that an increase in number resources can assure their fair andefficient distribution. Service viability and expansion depend as much on numbering sufficiency as on therules and procedures that govern allocation practices.

The notion of numbering as a national resource implies that these rules must be set by more thanone actor in order for wider consensus to be reached. Given that each country is characterised by its ownregulatory, industrial, and market conditions, the challenge is to define the appropriate model ofnumbering organisation that corresponds to a country's specific situation. There are, however, somecommon elements that can provide the basis for policy considerations on numbering.

4.1 Guidelines for the short term

The pressure for a shift to new forms of institutional organisation that would match with newobjectives of equity and efficiency in numbering administration is now becoming apparent. Under thesecircumstances, a first requirement would be to move-away from the traditional operator-managednumbering schemes to new mechanisms that would allow wider involvement of all actors concerned.

The establishment of a consultative body that would represent all "users" of number resources,that is, industry representatives, operators/ service providers, major user groups, and government agencies

34

is seen as a prerequisite for any type of organisational change. Such a body could be an open forum fordiscussion of all numbering-related issues, such as the introduction of portability, the review of nationalnumbering plan, and general competition issues that relate to numbering. Its establishment couldcompensate for both, the need for long-term planning of number resources and the fact that numberingshould be treated as a national resource and, thus, wider consultation from all parties concerned isnecessary.

Such a forum, however, should not underestimate the State's authority with regard to the use of anational resource. Here, the approaches taken by OECD Member countries differ as to, what stage of thenumbering administration process is the most appropriate for the State to interfere. Undoubtedly, the Statecan play an important role in protecting consumers' interest and supervising the market. A mixture ofwider public consensus on numbering issues with a more centralised administration provided by a Stateagency seems the most appropriate method for a fair and equitable organisation of the numbering space.The State, being the owner of the resource, could perform co-ordinating and regulatory functions, such asnumber allocation and provision of rights of use of numbers, while a separate consultative body couldundertake all the planning and management functions.

The above regulatory and management functions, however, involve considerable administrativecosts that should be shared equitably by all users of numbers. Several methods may be proposed for costrecovery:

• Impose a specific fee on operators/service providers and end-users, for their right to usepart(s) of the resource. In the case of the former, the fee could take various forms dependingon the kind of service provided (basic, cellular or other value-added service), the number ofblocks that have been allocated to, or reserved by, a particular operator, the number of accesscodes it has been assigned, etc.

• Create a formula by which to calculate the amount operators/service providers have to pay forthe numbers and access codes they have been allocated. The formula would correspond to theactual administrative burden placed on regulators after a specific request from a user. Thiswill be a complicated method since it will involve qualitative, as well as, quantitative criteriafor the approximation of a fee. For example, the final fee may depend on the hours spent todeal with a request, whether it can be satisfied immediately or under certain conditions, etc.but may not necessarily relate to the quantity of numbers requested (GTE, 1994).

• Other methods include market-based mechanisms such as a tender process or a public auction.Operators/service providers will be allocated numbers according to the amount of money theyare willing to pay for a particular block. Other parameters, such as social welfare and thegeographic coverage of a service, may also be considered in the case of a tender process.While such an approach will lead to maximisation of revenues for the State, it should notrepresent the best option to follow, since increase in Government revenues is not theobjective. Moreover, the introduction of financial criteria in the allocation of ordinarynumbers addressed to the wider public is opposite to the idea of numbers being a publicresource, should have no price.

• For individual subscribers, the best approach is the imposition of a specific fee to all userswho have been assigned numbers. Such a fee could be paid to the body of regulators andadministrators either through the operator/service provider, or directly to the State agency andcould be on an annual or a once-off basis.

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Other methods may also be envisaged but they rely upon regulators to consider taking intoaccount the particular conditions in a country and the profile of industry participants.

4.2 Guidelines for the long term

The commercial value of premium numbers has already been discussed. Their value can bejustified first, by the competitive advantage they give to their owners due to their memorable structure(differential rent), and second, by the fact that they are scarce resources since there are not as many easilymemorable numbers as there is demand (scarcity rent). Under these circumstances it would be logical toconsider a system of market-based allocation of premium numbers, the benefits of which would be a bettermanagement and a more efficient allocation of this resource.

Such market mechanisms could be a tender process, an auction or a lottery, each havingparticular advantages and disadvantages:

• In a tender process, it is expected that the regulator defines the parameters to be respected bythe candidates and awards the contract to the bidder that complies best with the pre-definedspecifications. In the case of premium numbers such criteria could be, for example, the socialwelfare of the service where numbers are supposed to be used, its geographic coverage, thegroup of users to which the service is addressed, etc. These criteria may eliminate premiumnumber allocation in certain types of services while favouring the development of others. Amajor disadvantage is that tender processes, in general, are susceptible to corruption. Thus, awell-established service provider may have to be discouraged from using other thanlegally-defined methods to win the bid.

• Auctions are considered as most appropriate mechanisms for the allocation of premiumnumbers and most efficient in terms of maximising revenues for the State. In an auctionsystem, premium numbers would be allocated to those who can afford and are willing to paythe highest price. Big players would be particularly favoured by this mechanism, whereas forindividual users and new entrants auction processes may increase barriers to access topremium numbers.

• Lotteries, on the other hand, provide equal chances to all candidates to have access to thisresource. This approach does not necessarily lead to revenues for the State. It may, however,contribute to the creation of a secondary market where substantial capital gains could bederived from number trading between "winners" and "losers". Any intervention in order forthe State to get a share of the revenues from the resale of numbers, is an issue that needs to befurther considered.

Irrespective of the method chosen, any market based approach should be accompanied by aproper regulatory framework that would define the administrative procedures to be followed for theallocation of premium numbers. Yet, many matters need to be clarified, such as, for example, whatmechanisms can guarantee access of individuals and social agencies to these numbers since these groupsmay lack the resources to participate in the competition. It is recognised that the issue of charging forpremium numbers is complicated and difficult to regulate. Since policy-makers, however, are concernedwith the efficient allocation of numbers, they should seriously consider this option.

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ANNEX 1 RESPONSES FROM OECD MEMBER COUNTRIES

If competitive service provision is allowed can customers take telephone numbers with them if they changeoperator (e.g. transfer 800 numbers, cellular numbers)?

Australia No response.

Austria N.A. (not available/not applicable).

Belgium Without object (not applicable).

Canada Carriers offering interchange services plan to implement 800 number portabilityearly in 1994.

Denmark No response.

Finland The matter is under consideration. In principal it is possible if all parties agreeand it is technically possible, but in practice it is not likely.

France Following a public consultation on this issue by the DGPT at the end of 1993, itis foreseen that a consultative committee on numbering will be set up, chaired bythe regulator and bringing together different operators, equipment representativesand user associations.

This committee will be consulted on the procedures and criteria to be used toallocate numbering resources.

After phase 3 of the French numbering plan has been put in place in the first partof 1996, the allocation of numbering resources will be entirely managed by theDGPT. It is envisaged that the following general principles will be observedirrespective of the type of resource (blocks of numbers either geographic or not,abbreviated numbers, special numbers).

-- On demand by a potential operator, a pre-allocation of numbering resources ismade by the DGPT.

-- When an interconnection agreement has been made between a supplier andthe public operator, France Telecom, the DGPT will make the final allocationof numbering resources which cannot be transferred to a third party.

-- The beneficiary of an allocation must inform the DGPT yearly of the use ofthe resources allocated and this information will be made public.

-- The DGPT can terminate an allocation in the event of bad management by thebeneficiary operator (under utilisation, speculative usage, etc.).

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Germany No.

Greece No response received in Regulatory part.

Iceland There are no regulations covering this issue.

Ireland No response.

Italy No answer.

Japan If customers change operators (including cellular provider) they cannot taketelephone numbers with them.

Netherlands Not applicable.

New Zealand Other than to cellular markets, local competition has yet to occur. So Telecomissues all numbers (except for cellular where Bell South has its own numbers).

Norway This is so far not regulated. To the extent that there exists any policy in this areathe NRA is of the opinion that customers should be able to keep theirnumbers/addresses. However, this is mainly a question of technical capabilities.

Portugal Not applicable in the fixed telephone service. Concerning the cellular services, itis not imposed.

Spain No response.

Sweden The question is currently under work within the NTA and discussions are heldbetween the NTA and involved operators. However, a final decision the matterhas not yet been taken (Jan. 1994).

Switzerland Without objective (not applicable).

Turkey N/A (not applicable/not available).

United Kingdom No, however, a study is under way into the costs and benefits of the introductionof number portability into the fixed network. Results of the study are expected inearly 1994.

United States Sometimes customers can take 800 numbers with them if they change operatorbut they can't with most other numbers.

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(*) indicates that the Regulatory part of the questionnaire, or part of it, had not been received by the time of preparation ofthis report.

Have there been any recent initiatives in the area of telephone numbering in your country? Please providedetails.

Australia No response.

Austria N.A. (not available/not applicable).

Belgium Operation of the pan-European emergency call number "112" in 1.1.93.Adoption from 1.1.94 of the prefix "0800" for the Freephone service.

Canada - North American wide 800 number portability

- A proposal is currently before the CRTC (Canadian Radio-Television and

Telecommunications Commission) for 800 premises-based services.

- Canada-United States review of the future of the North American Numberingplan.

Denmark No response.

Finland Finland was in 1990 divided into 12 telecommunications areas. This newdivision has caused changes in numbering. Due to competition in telephonyprefixes for trunk network operators have been introduced and local telephonenumbers have been redivided. Some national service numbers have also beenchanged according to the EC regulations.

France See above response.

Germany Common initiatives of EC Member States and CEPT members.

Greece No response received in Regulatory part.

Iceland Plans to change the numbering systems in 1995 have recently been published.These changes will include measures to change certain emergency and routingnumbers to comply with EU plans.

Ireland No response.

Italy No.

Japan None.

Netherlands The Ministry of Transport will take over the management of number plans(which is now at PTT) to facilitate competition. The Ministry can providenumbering blocks to service providers (GSM-voice-data). This "take-over"process will be completed before 1998.

New Zealand No response.

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Norway Norway has a fairly new national numbering plan. The transfer from the old tothe new numbering plan has just been completed.

Portugal At the moment a new project of numbering plan is being finalised.

Spain No response.

Sweden (Same response as in previous question).

Switzerland Collaboration between OFCOM and PTT.

Turkey Yes, it has recently been changed. It is a closed numbering scheme. Mainfeatures of the new numbering are 7 digit telephone numbers throughout thecountry, a single area code for each province with no need to use codes for callswithin the same area, 3 digit area codes, access code (0) for long distance calls,access code (00) for international calls, special service numbers starting with 1.

United Kingdom Oftel issued a consultative document "Numbering: Choices for the Future" insummer 1993, setting out proposals for the evolution of the United KingdomNumbering Scheme (copy attached).

United States Yes, there have been initiatives in numerous areas, including: interchangeablearea codes, longer carrier identification codes, and assignment of numbers forpersonal services within the 500 code.

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NOTES AND REFERENCES

1. CCITT, Recommendation E.164 -- Telephone Network and ISDN Operation, Numbering, Routing and MobileService -- Numbering Plan for the ISDN Era, Geneva 1991 (approved 23.8.1991).

2. According to the CCITT Recommendation E.164, the maximum number of digits for an international number(excluding the international dialling prefix) is currently 12. According to CCITT Recommendation E.165, thisis to rise to maximum 15 after a specific time set by the Recommendation (Time T). This time is scheduledfor 31 December 1996. By that time all systems handling international calls should be modified accordingly inorder to adapt to the change.

3. According to Telecom New Zealand standard interconnection agreement, that percentage should be "9 percent national toll market share or the Service Operator and all comparable interconnecting parties offeringservices similar to the Service Operator's Network Service (other than any member of the Telecom Group)have achieved an aggregate 13 percent national toll market share..." (Ministry of Commerce, New Zealand,1991).

4. The situation is going to change in the United Kingdom. OFTEL will take over as the NumberingAdministrator and the Director General of Telecommunications will be the authority responsible for takingdecisions on numbering matters in accordance with the defined Numbering Conventions. OFTEL is in theprocess of undertaking complete responsibility from British Telecom (BT) over numbering administration andpresented its draft Numbering Conventions in a consultative document issued in March 1994. Transfer ofresponsibilities from BT to OFTEL is expected to be completed during 1994.

5. Council of the European Communities (1993), Common Position adopted by the Council on 30 June 1993with a view to adopting a Directive on the application of Open Network Provision (ONP) to voice telephony,Brussels, 1 July 1993.

6. The Federal Communications Commission (FCC) has asserted plenary jurisdiction over the administration ofNANP within the United States. In Canada, the corresponding regulatory agency for numbering issues is theMinistry of Communications. In the Caribbean members of NANP, no special regulatory authorities existswith jurisdiction over NANP issues and governments of these countries participate in numbering relateddiscussions whenever they find it appropriate.

7. Information derived by a Senior TAC official, 9 May 1994.

8. In the United Kingdom, for example, independent research undertaken by Hutchison Telecom, which haslaunched a personal communications network in the United Kingdom, and Southwestern Bell, partner inSBC Cable Communications UK, have shown that customers are deterred from shifting operators/serviceproviders because of the unavoidable change in their numbers (Carey and Tucker, 1994).

9. According to OFTEL's market research, 84 per cent of the people questioned thought it was important to beable to know the cost of a particular call from its number prefix (OFTEL, 1993). AUSTEL's market researchrevealed that the percentage of customers wanting to keep their telephone numbers when changing locationswas decreasing with the distance involved (only 32 per cent thought it was important to keep their numbers

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when moving within the country). On the contrary, over two thirds of subscribers think it is important to beable to keep their telephone numbers when moving within their city (AUSTEL, 3/92).

10. The line must be presubscribed to AT&T or else the user has to dial AT&T's prefix (10 288) in order for hiscall to be completed to the right party. At the moment, the LEC as soon as it recognises the "700" code itroutes the call to AT&T's Easyreach service platform. The call routing data is obtained from the system'sdatabase and the call is completed over AT&T's network. The issue of access routing of non-geographicservices, i.e. whether the call should be routed to the service provider or to the caller's presubscribed carrier, isof major concern and is currently being worked by an industry committee (Hirsch, 1994).

11. The original request of AT&T for the assignment of "700" code to provide personal numbering servicesinitiated a process of assignment guidelines for personal numbers by Bellcore in August 1993. The FCC,however, ruled Bellcore not to proceed with its plans. Its ruling was based more on the conflicting political,commercial and regulatory problems that such project would involve rather than on the technical constraintsof number allocation planning. Meanwhile, AT&T was using the "700" service access code for its service.

12. ITU-T Recommendation E.168 (previously CCITT Recommendation) -- Application of E.164 NumberingPlan for UPT, March 1993 (under revision).

13. OFTEL (1991), White Paper, Competition and Choice: Telecommunications Policy for the 1990s.

14. It should be noted that the only portability option currently considered by OFTEL is that for telephonyservices delivered to a fixed address (the subscriber does not change location).

15. The North American Numbering Plan (NANP) administrator, Bellcore, had assigned 800-NXX blocks tointerested carriers in order to stimulate competition. Each block contains 10,000 numbers but one NXX codecould be allocated to a carrier if it presented a fill level of 70 per cent, that is 7000 numbers required, allowingthus greater numbering flexibility for new carriers to establish their service. Each of these numbers would beeventually "sold" to customers by the carrier. However, as the market for freephone services was expanding,this approach had its limitations. Namely: (a) numbers were used inefficiently, (b) customers often could notget the number they wanted if the carrier they were using had been assigned a different code, and(c) customers could not change service providers without changing their numbers. As a result, Bellcoreinitiated actions to implement 800 number portability. Bellcore's plan included an intervening time until eachgeographical area had its own database of 800 number service. The database has the ability to identify a10-digit carrier function from memory rather than use a 6-digit translation to route the calls to the correctcarrier. At that stage the technical capability exists for users to change carriers within the territory served bythat database. (Conners, 1994, and Bellcore, 1985).

16. "Sometimes a Great Notion", Editorial Article, Communications Week International, 7 February, 1994.

17. Source: Telecommunication Reports, December 21, 1992. In practice, this has become true. For example, inFebruary 1994, Computer Associates International, Inc. moved its 800 number traffic to MCI from AT&T as aresult of portability.

18. "Local Number Portability", Telecommunication Reports, January 4, 1993.

19. View expressed by Southern New England Telephone Company Co. and quoted in TelecommunicationsReports, January 4, 1993.

20. Opinion expressed by the Australian & Overseas Telecommunications Corporation in AUSTEL's SummaryReport of Submissions from "Your Number's Up", Submission 36.

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21. An interesting case was reported in the press in April 1994, where a small American database company wasattempting to break BT's monopoly in directory information services. The company has downloaded the entireBritish telephone directory onto a Compact Disk (CD) which it sells for only £50. A similar, but lesssophisticated, disk produced by BT costs £1,000. BT has taken legal action to prevent the sale of the CD in theUnited Kingdom. BT's view is that "... we own the telephone numbers information and we will defend thatcopyright rigorously in the High Court". The outcome of the appeal process was not yet known by the time ofpreparation of this report (Sunday Times, April 18, 1994).

22. Council Decision of 29 July 1991 on the introduction of a single European emergency call number(91/396/EEC; OJ L217/31, 06.08.91).

23. Council Decision of 11 May 1992 on the introduction of a standard international telephone access code in theCommunity (92/264/EEC; OJ L137/21, 20.05.92).

24. Proposal for a Council Directive on the application of Open Network Provision (ONP) to voice telephony,OJ C 147, 27.5.1993; COM(93)182. Common position formally adopted by the Council on 30 June 1993.

25. The list of services included in this category is presented in Annex III of the Directive and refers to pan-European Freephone and Premium rate services, call transfer, automatic reverse charging service facilities,calling line identification, and access to operator and directory enquiry services in other Member States.

26. Council Resolution of 19 November 1992 on the promotion of Europe-wide co-operation on numbering oftelecommunications services (92/C 318/02; OJ C318/2, 04.12.92).

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